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Debt Free Direct Grp (FRP)

Thursday 08 July, 2004

Debt Free Direct Grp

Preliminary Results

Debt Free Direct Group PLC
08 July 2004
8th July 2004
DEBT FREE DIRECT GROUP PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 30 APRIL 2004
FURTHER PROGRESS AND MOVE INTO NET PROFIT
Highlights
Debt Free Direct PLC, the leading debt advice and solutions company, announces
its results for the year ended 30 April, 2004.
Highlights for the year include:
• Financial performance ahead of expectations with EBITDA of £507,766.
Profit after tax of £56,431 compared with loss after tax of £114,850 for the
five months included in the financial period ended 30 April 2003
• Balance sheet successfully restructured with an institutional placing
raising £3.7 million and acquisition of 96.5% of the outstanding preference
shares and loan notes. Balance sheet strengthened and level of gearing
reduced
- Net cash position of £339,607
- Net assets increased from £0.5 million to £5.44 million
• New premises established to accommodate growth in the business
• Additional investment in IT and operational and management resources to
support Debt Free Direct's philosophy of best advice, laying a firm
foundation for future growth
• Further progress towards establishing broader business model and
increasing number of referred leads
• Strong trading in the four months to April and a significant increase in
trend run rate of new IVA cases
• Appointment of Lord Hoyle of Warrington, former Government Whip, as
non-executive director
• Proposal put forward by Debt Free Direct for a new consumer IVA (CIVA)
well received by the Government
Grenville Folwell, Chairman, said:
'I am delighted that the Group has continued to make progress and has moved into
net profit in the year ended 30 April, 2004. The Group has used the proceeds of
the successful placing to invest in the business and increase its operating
capacity.
'The Group is poised to exploit its distinct position in a large and growing
market. By providing best advice to our target sector and by maintaining our
high ethical and regulated standards, we aim to become the most respected
provider of advice and appropriate solutions to over-indebted consumers in a
rapidly expanding marketplace.'
Enquiries
Debt Free Direct (01257 240529)
Andrew Redmond
Paul Latham
Citigate Dewe Rogerson 0207 638 9571
Michael Berkeley
Fiona Mulcahy
Notes to Editors
Year Ended 30 April 2004
Debt Free Direct helps individuals find the best solution to their debt
problems, based upon an analysis of their particular financial circumstances.
Financial information on an individual is processed through a computer model
(the Best Advice Model) developed by Debt Free Direct in order to recommend a
solution suitable for that individual's particular financial circumstances. The
solutions offered range from basic advice, such as simply destroying credit
cards and curbing unnecessary expenditure, to the following solutions:
• consolidation loan
• re-mortgage
• informal arrangement
• individual voluntary arrangement (IVA)
• bankruptcy
Debt Free Direct is unique in the marketplace in that unlike most of its
competitors who sell specific products, Debt Free Direct looks to provide the
best advice to the consumer and recommends them the most appropriate service.
Chairman's Statement
Year Ended 30 April 2004
The past year has seen particularly important and exciting developments which
will significantly benefit the Group in future years.
The successful institutional placing has allowed the Group to make rapid
operational improvements at all levels, whilst considerably strengthening the
balance sheet.
As ever, our people have wholeheartedly embraced these changes. As outlined
last year, they are at the heart of our philosophy of providing best advice and
appropriate solutions to all over-indebted consumers who turn to us for help.
I have every confidence that Debt Free Direct will build successfully on this
platform and create true value for all our shareholders.
G J Folwell
Chairman
7 July 2004
Chief Executive Officer's Statement
Year Ended 30 April 2004
Background
The last 12 months have been fundamental in building on the foundations which
were laid in the period following our successful admission to AIM in December
2002.
Last year we anticipated that we were well placed to build shareholder value in
the future, given that the fundamentals of the business were all in place.
Essentially we have the right philosophy complemented by our Best Advice Model
and high ethical standards in a market which will become increasingly regulated.
Furthermore, exceptional economic conditions have combined to result in record
levels of secured and unsecured debt. We forecast last year that those economic
conditions would not last indefinitely. It was clear in early 2003 that
interest rates would rise and result in ever increasing numbers of over-indebted
consumers requiring help.
Those forecasts have proved to be accurate and we have no reason to alter our
view of the market looking towards 2005 and beyond.
The Business
Our Vision
Our vision remains to be the UK's most respected provider of advice and
appropriate solutions to over-indebted consumers.
Debt Free Direct continues to be different
We continue to be unique in the market by offering free, impartial advice to
every caller without exception.
The Best Advice Model continues to be independently recognised as an industry
leader, systematically and consistently delivering best advice on a timely basis
to large volumes of consumers requiring our help.
Building shareholder value
We remain firmly of the view that, to continue to build shareholder value, we
should concentrate on doing what is right and appropriate for all our customers
in every circumstance.
Working towards a broader business model
The business model is based upon continuing to take a share of the existing
market and all our budgets and forecasts have been made upon that assumption.
However, during 2003 we recognised the potential for accelerated growth, as the
market, and our share of it, increased.
Chief Executive Officer's Statement (Continued)
Year Ended 30 April 2004
Strengthening the Balance Sheet
On 1 October 2003 the Company placed 6,416,667 Ordinary Shares at 60p per share,
which raised additional finance of approximately £3.7m (net) and has allowed the
Group to continue to make progress and build for the future.
On 22 December 2003, an offer was made by the Company to acquire all the
preference shares and loan notes issued by its subsidiary, Debt Free Direct
Limited.
We were pleased to announce on 16 February 2004 that acceptances of the offer
were received in respect of 96.5% by value of the total preference shares and
loan notes (£2,823,464).
The amount payable by the Company in February 2004 in cash in respect of the
acquisition of preference shares and loan notes was £1,359,985. In addition,
2,032,520 Ordinary Shares were issued at a price of 60p per share. Those shares
are subject to 'lock-in' arrangements for a two year period.
The successful completion of the placing and the offer has significantly reduced
the level of gearing on the Company's balance sheet and allowed the business to
increase its operating capacity as well as its flexibility to pursue new
business opportunities.
Investment in resources
Investments have been made in operational and management resources, additional
marketing and advertising, and new premises to accommodate future growth.
Board changes
On 1 March 2004 the Company appointed Lord Hoyle of Warrington to its Board as a
non-executive director. We warmly welcome him onto the Board and look forward
to him playing a valuable role in the future.
Lord Hoyle replaced Ian Currie on the Board, who stepped down to pursue other
interests. We would like to thank Ian for his contribution to the business
during his term of office.
Operating Performance
As a result of the above growth strategy and investments, the Group is well
placed to continue to build on its earlier success.
EBITDA for the period for the Group is £507,766 which was ahead of expectations.
It is a particularly impressive outcome given the significant operational
changes being made during the second half of the year following the
institutional placing, including moving into new premises.
The trading results for the year and the Group's financial position at the end
of the year are shown in the financial statements, which follow this review.
Chief Executive Officer's Statement (Continued)
Year Ended 30 April 2004
Current trading and prospects
The Group has continued its progress and profitability in the period since 30
April 2004.
As stated above, the business model is based upon continuing to take a share of
the existing market and all our budgets and forecasts have been made upon that
assumption.
However, it is clear that overdue regulatory change is now on the horizon.
Last year we stated that this is a market which is ripe for increased regulation
and we would positively welcome any future Government initiatives. Given our
high ethical and regulatory standards, we believe such changes could only
strengthen our position in the marketplace.
To solve the problem of over-indebtedness, we believe that there needs to be
appropriate rehabilitation for those who are already irreversibly over-indebted
at the point at which they become insolvent.
In December 2003 the Government issued a Consumer Credit White Paper which, in
part, focused on the problem of over-indebtedness. We have subsequently issued
a response to that White Paper, which focuses in particular on a proposal for a
new, simpler Consumer IVA (CIVA). Our response has been well received and we
recently had an encouraging meeting with the Consumer Minister, Gerry Sutcliffe
MP.
The future introduction of the CIVA (or similar) would have a significant impact
on the existing market size and dynamics. We would particularly benefit as
other companies will struggle to embrace the cultural change required from
higher regulatory standards and operational efficiencies imposed upon them.
Notwithstanding the above we are continuing to examine prospects for future
growth potential.
In particular we are already actively analysing the benefits of introducing
either new solutions into existing markets or existing solutions into new
markets. In so doing, we will, as ever, continue to be focused on maximising
shareholder value whilst being mindful of the level of risk involved.
We look forward to being able to report on more progress in these areas in the
months ahead.
A Redmond
Chief Executive Officer
7 July 2004
Consolidated Profit And Loss Account
Year Ended 30 April 2004
Period from
Year ended 26 April 02 to
30 April 04 30 April 03
£ £
TURNOVER 4,210,513 1,058,248
Cost of sales (3,008,548) (738,877)
GROSS PROFIT 1,201,965 319,371
Administrative expenses
Goodwill amortisation (311,809) (126,641)
Other administrative expenses (789,844) (288,041)
(1,101,653) (414,682)
OPERATING PROFIT/(LOSS) 100,312 (95,311)
Interest receivable 42,797 963
Interest payable and similar charges (78,932) (80,443)
PROFIT/(LOSS) ON ORDINARY ACTIVITIES 64,177 (174,791)
BEFORE TAXATION
Tax on profit/(loss) on ordinary activities (7,746) 59,941
PROFIT/(LOSS) FOR THE FINANCIAL PERIOD 56,431 (114,850)
Earnings/(Loss) per share - basic 0.21p (1.28p)
Earnings/(Loss) per share - diluted 0.21p (1.28p)
The group has no recognised gains or losses other than the results for the year
as set out above. All of the activities of the group are classed as continuing.
The company has taken advantage of section 230 of the Companies Act 1985 not to
publish its own profit and loss account.
Consolidated Balance Sheet
30 April 2004
2004 2003
£ £ £
FIXED ASSETS
Intangible assets 2,557,596 2,791,424
Tangible assets 564,530 211,349
3,122,126 3,002,773
CURRENT ASSETS
Debtors (including £490,671 due after more than one 2,641,878 1,254,124
year (2003:£249,066))
Cash at bank 1,171,176 81,249
3,813,054 1,335,373
CREDITORS: Amounts falling due within one year (1,330,180) (1,672,471)
NET CURRENT ASSETS/(LIABILITIES) 2,482,874 (337,098)
TOTAL ASSETS LESS CURRENT ASSETS/(LIABILITIES) 5,605,000 2,665,675
CREDITORS: Amounts falling due after more than (63,979) (168,392)
one year
PROVISION FOR LIABILITIES AND CHARGES (93,585) (1,987,987)
5,447,436 509,296
CAPITAL AND RESERVES
Called-up equity share capital 309,492 225,000
Share premium account 5,196,363 399,146
Profit and loss account (58,419) (114,850)
SHAREHOLDERS' FUNDS 5,447,436 509,296
Consolidated Cash Flow Statement
Year Ended 30 April 2004
Year ended 30 April Period from
2004 26 April 02 to
30 April 03
£ £
NET CASH OUTFLOW FROM (764,097) (369,093)
OPERATING ACTIVITIES
RETURNS ON INVESTMENTS
AND SERVICING OF
FINANCE
Interest received 42,797 963
Interest paid (85,161) (29,783)
Interest element of (9,000) -
finance lease rental __________ _________
payments
NET CASH OUTFLOW FROM (51,364) (28,820)
RETURNS ON INVESTMENTS
AND SERVICING OF FINANCE
CAPITAL EXPENDITURE
Payments to acquire (317,531) (33,281)
tangible fixed assets __________ _________
NET CASH OUTFLOW FROM (317,531) (33,281)
CAPITAL EXPENDITURE
ACQUISITIONS
Cash acquired with - 271,822
subsidiaries
Acquisition of DFD (1,359,985) -
Limited preference
shares and loan notes
__________ _________
NET CASH OUTFLOW FROM (1,359,985) 271,822
ACQUISITIONS
CASH OUTFLOW BEFORE (2,492,977) (159,372)
FINANCING
FINANCING
Issuing of ordinary 3,850,001 373,572
share capital
Professional costs (187,802) (168,167)
charged to the share
premium account
Capital element of (45,930) -
finance lease rental
payments
Repayment of loans (33,365) -
__________ _________
NET CASH INFLOW FROM 3,582,904 205,405
FINANCING _________ _________
INCREASE IN CASH 1,089,927 46,033
_________ _________
RECONCILIATION OF OPERATING PROFIT/(LOSS) TO NET CASH OUTFLOW FROM OPERATING
ACTIVITIES
Period from
Year ended 26 Apr 02 to
30 Apr 04 30 Apr 03
£ £
Operating profit/(loss) 100,312 (95,311)
Amortisation 311,809 126,641
Depreciation 95,645 23,074
Increase in debtors (1,395,500) (402,548)
Increase/(decrease) in creditors 123,637 (20,949)
Net cash outflow from operating activities (764,097) (369,093)
Consolidated Cash Flow Statement (Continued)
Year Ended 30 April 2004
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
Period from
Year ended 26 Apr 02 to
30 Apr 04 30 Apr 03
£ £
Increase in cash in the period 1,089,927 81,249
Cash outflow from acquisition of loan notes 601,714 -
Cash outflow from repayment of loans 33,365 -
Cash outflow from decrease in lease financing 45,930 -
-
Change in net debt resulting from cash flows 1,770,936 81,249
Hire purchase agreements acquired with subsidiary - (35,216)
1,770,936 46,033
New hire purchase agreement (131,177) -
Loans acquired with subsidiary - (1,346,185)
1,639,759 (1,300,152)
Change in net debts
Net debt at 30 April 2003 (1,300,152) -
Net debt at 30 April 2004 339,607 (1,300,152)
Notes
Year Ended 30 April 2004
1. TAX ON PROFIT ON ORDINARY ACTIVITIES
Period from
Year ended 26 Apr 02 to
30 Apr 04 30 Apr 03
£ £
Current tax:
UK Corporation tax based on the results for the period at 19% - -
Deferred taxation charge/(credit) - -
- origination and reversal of timing differences 42,450 (59,941)
- effect of tax rate change on opening balances (34,704) -
Total tax charge/(credit) 7,746 (59,941)
2. EARNINGS PER SHARE
The calculation of basic earnings per share is based on the profit of
£56,431 (2003 loss:£114,850) and a weighted average number of ordinary shares
in issue during the period of 26,744,493 (2003: 8,961,260). The calculation of
diluted earnings per share is based on the profit of £56,431 (2003 loss
£114,850) and a diluted weighted average number of ordinary shares of
27,029,793.
3 STATUS OF FINANCIAL INFORMATION
The financial information set out in this report does not constitute the
company's statutory accounts for the year ended 30 April 2004, but is derived
from those accounts. Statutory accounts for the year ended 30 April 2004 will
be delivered to the Registrar of Companies shortly. The auditors have reported
on the statutory accounts for the year ended 30 April 2004 and their opinion was
unqualified for these financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange

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